Tax and National Insurance

All employees who are over the age of 16 but below state retirement age, and whose income is above the Lower Earnings Limit (LEL), are required by law to pay National Insurance contributions (NICs). All employees pay Pay As You Earn (PAYE) income tax. HM Revenue and Customs (HMRC) provides detailed information about the regulations for NICs and PAYE tax.

After hiring an employee in PeopleSoft HR, you must enter the employee's statutory details using pages in Global Payroll for the UK. If you run payroll without setting up tax and NI details for a payee, the payroll calculation uses these default tax and NI values and it generates payee messages for the payee:

  • Tax Code: BR

  • NI category: A

If you want to apply different default values, change the value of these variables:

  • TAX VR CD ALPHA

  • TAX VR TXBASIS

  • GBR VR TAXCODE

  • NI VR CATEGORY

See PeopleSoft Human Resources Administer Workforce: (Classic) Adding a Person.

See PeopleSoft Human Resources Administer Workforce: Understanding Job Data.

Managing Starters from an NI Perspective

Global Payroll for the UK automatically calculates National Insurance for new employees who are paid later than the period in which they begin working—for example, an employee starts on May 25 but is not paid all he or she is due until the June payroll. In a situation like this, Global Payroll for the UK calculates the National Insurance contribution for May and June separately and posts the results in the correct period. To activate this feature, the automatic retro feature for National Insurance calculations should be activated at implementation.

Managing Leavers from an NI Perspective

When payments are made to employees after the pay period in which termination occurs, there are specific statutory requirements in the UK for establishing the basis on which National Insurance should be calculated. For regular payments, the normal NI basis is used. If the payment is irregular, a weekly basis should be used. HMRC defines regular and irregular payments.

When a payment is made to an employee after the termination has been processed, the system uses the value of the accumulator GBR AC IRREG SEG to determine whether the payment is irregular. This accumulator tracks all earning elements that constitute irregular payments.

If the value of GBR AC IRREG SEG is equal to the value of the accumulator GBR AC NIBL SEG the weekly NI basis is automatically applied for NI calculation purposes. If GBR AC IRREG SEG and GBR AC NIBL SEG are not the same, then the payment comprises regular payments only, or a combination of regular and irregular payments. In this case, the system calculates NI using the employees' pay frequency basis.

Alternatively, you can also override the NI frequency on the Maintain NI Data GBR page to force a change of the NI basis.

Note:

When you define earning elements for irregular payments, make the earnings members of the accumulator GBR AC IRREG SEG.